Fragmentation and heterogeneity in the euro-area corporate bond market: Back to normal?

Andrea Zaghini

Journal of Financial Stability, 2016, vol. 23, issue C, 51-61

Abstract: We assess the degree of market fragmentation in the euro-area corporate bond market by disentangling the determinants of the risk premium paid on bonds at origination. By looking at over 2400 bonds we are able to isolate the country-specific effects which are a suitable indicator of the market fragmentation. We find that, after peaking during the sovereign debt crisis, fragmentation shrank in 2013 and receded to pre-crisis levels only in 2014. However, the low level of estimated market fragmentation is coupled with a still high heterogeneity in actual bond yields, challenging the consistency of the new equilibrium.

Keywords: Corporate bond market; Sovereign debt crisis; Financial fragmentation (search for similar items in EconPapers)
JEL-codes: G32 G38 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (29)

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Working Paper: Fragmentation and heterogeneity in the euro-area corporate bond market: Back to normal? (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finsta:v:23:y:2016:i:c:p:51-61

DOI: 10.1016/j.jfs.2016.01.009

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